Amazon Phone: World's Largest Retailer Denies Plans To Release Free Smartphone This Year

Amazon.com Inc. (NASDAQ: AMZN) denied rumors Monday that it was planning to launch a smartphone that would be free without contract. Not only does the Seattle-based retail giant have no plans for a free phone, a spokesperson said, it's not launching any smartphone at all.

The rumor was started Friday by Jessica Lessin, a former Wall Street Journal reporter, who wrote that sources with Amazon reported that the company would release a smartphone for free, even if users did not sign up for a wireless plan. Lessin included that the plans weren’t set in stone and that many details had not been worked out, but that Amazon was working to undercut rivals like Apple Inc. (NASDAQ: AAPL) in the smartphone market.

The claim received widespread attention, prompting to Amazon to give Lessin an official response Sunday.

“We have no plans to offer a phone this year, and if were to launch a phone in the future, it would not be free,” Amazon said.

So a free phone really does sound too good to be true, but it really isn’t so hard to believe given Amazon’s track record with hardware. With the Kindle Fire series, Amazon sold the tablets at cost to profit on the content bought with the devices. The strategy hoped to undercut higher-priced tablets like the iPad, and Amazon could be looking to do something similar with a smartphone.

Apple revealed the latest generation of iPhones at a media event Tuesday, this time revealing a lower-end model, the iPhone 5C, and a premium model, the iPhone 5S. The least expensive version of the iPhone 5c still retails for $99 with a wireless contract, and Apple will also start giving the old iPhone 4S for free with a contract.

It’s likely a move to break into the budget smartphone market, potentially making it more difficult for Amazon to get into the smartphone business.